Measuring The Success (ROI) of Your Search Engine Marketing

One of the most successful and challenging things about marketing on the internet is that the impact of your marketing efforts is measurable. While critical to your initiative, the measurement of true return on investment (ROI) for the lodging industry is a complex exercise since the results manifest themselves across multiple channels. What further compounds the complexity of measuring these results is that often a website that is being marketed and the actual booking engine where the transaction is closed may be on different servers. In this article, we explain the challenges of measuring search engine marketing results and some solutions for accurately tracking your investment returns.

The Challenge of Measuring ROI

It is very challenging to measure the true ROI generated from your SEM efforts. In many cases, visitors leave your website and go to a branded booking engine or stand-alone booking engine to complete the purchase rather than booking directly on the hotel site. Most of the time, the purchasing cycle is closed on a different server and not on the server where your hotel website is hosted. While you can find out the total revenue booked through your site, it’s quite difficult to do sophisticated tracking, such as key word conversions, organic and paid conversions, unless you embed tracking codes in the back-end on booking engine pages.

Figure 1 below illustrates the typical marketing and booking scenarios for the lodging industry. Specifically, any search engine marketing campaign can result in bookings on any of the following channels:

In order to get a complete picture of your return on investment for an online marketing campaign, our recommendation is to track each of the above channels. In the following sections of this article, we will discuss how each of these channels can be measured effectively.

Figure 1 Channels Impacted by Online Marketing Efforts

Internet Booking Engines

Internet booking engines are a direct channel for your online marketing efforts, and are one of the easiest channels to measure the return on investment and sources. The internet booking engine may or may not be hosted on the same server as the website which is being marketed. In either case, most booking engine reports will be able to show the actual bookings received via the website that is being marketed. Make sure that you assign a special code in your booking engine for all reservations coming from your website and for any online marketing campaigns that you may conduct such as banner ads, email marketing, etc.

We have segmented the key performance indicators (KPIs) for tracking online marketing efforts into different categories depending on the goals and the level of sophistication of the user.

1. Simple Conversion Tracking

The KPIs for the simplest form of tracking can give an overall snapshot of whether your SEM efforts are working or not. This tracking is ideal for senior management and non-technical front-line/management staff. Simple conversion tracking provides an overall idea about the return on investment from the marketing activity without going into a lot of detail about the search engines or keywords used to find the hotels. Figure 2 illustrates the concepts behind simple conversion tracking.

Indicators For Simple Conversion Tracking:

1. Visitors: Is my search marketing working? Is my site traffic continuing to increase taking into account seasonality. Look at a year-on-year comparison.

2. Page Views: Is my site attracting the right kind of visitors? Is the site sticky?

3. Click-Throughs to Booking Engine: How many people went into my booking page to check rates? Several marketing sources, both internal at the hotel and external agencies will regard this as the true measure of the success of their campaigns. Once you have gotten the consumer to check out your rates, the marketing campaign has been successful. At this point, the responsibility for conversion shifts from Marketing into Revenue Management and has a strong bearing on whether the hotel has rooms, if the rates are competitive with the market, and if the booking engine is easy to use.

4. Actual Revenue Generated – the bottom line. This may be available from your website analytics software if the pixels from the tracking software are embedded in your booking engine. Or, the same report should be available from the booking engine reports and can be tracked for most brands and booking engines in the market.

Figure 2: Conversion Tracking

2. Advanced Conversion Tracking

The next level of detail in analyzing the website analytics report involves understanding the source of visitors coming to your website. This will enable you to determine the effectiveness of different search engines and referral directories as well as the keywords that are being targeted. The main KPIs to review are:

1. Search Terms – What people type in the search engines to get to your website

2. Referring Search Engines and Directories – Which search engines and directories are most effective in driving visitors to your site

3. Feeder Market – What are your feeder markets where visitors are coming from

4. Visitors by Campaigns: SEO, PPC, Banners, Emails – Which campaigns are most effective in driving visitors to your website

Advanced tracking should be done at two levels on your website – one for the total visitor traffic to your website and then for the visits that result in confirmed reservations. If the tracking software pixels are not embedded in the booking engine, the next best thing to analyzing confirmed reservations is to understand these KPIs for the visitors going into your booking engine. Analyzing visitors going into your booking engine, although not as ideal as tracking actual confirmed reservations behavior, gives you a very good measure of the effectiveness of your online marketing campaigns.

3. Sophisticated Conversion Tracking

The next level of sophistication in analyzing your website analytics report comes from understanding the click-through path of the visitors to your site and gaining a better understanding of which pages on your website are most effective and which pages result in consumers getting turned off. The main goal of tracking these metrics is to understand how to improve the content and navigation flow on your website to maximize conversion.

In our experience with over 500 lodging industry clients, a significant amount of conversion for your online marketing efforts happens offline – on the phone. The ratio between online to offline conversion varies, but we have observed that for every one reservation generated online, there are between 2X to 7X the reservations generated on the phone. The actual ratio depends on the brand of the hotel and the market segment that the hotel operates in. In general, the conversion ratio is close to 2X for branded upscale segment hotels and closer to 7X for luxury, high ADR independent resorts. The online to offline conversion also varies if the hotel is pushing a lot of marketing packages which typically generate more questions. One rational explanation for such high offline conversion vs. other industries is that we are in the services business and guests still want to talk to a live person before they book accommodations. Of course, repeat clients are more likely to book online.

There are several technologies available to track phone call conversions. At the simplest level, you can assign a unique number for your marketing campaigns and your website so that all calls on the unique numbers can be traced back to the campaigns. Make sure that those numbers do not end up in your marketing collateral. More sophisticated tools, such as the one shown below, will not only track calls from different campaigns, but can track by keywords and search engines. In addition, these tools provide the capability to record phone calls and measure actual conversion.

Depending on your aggressiveness and your marketing budget, you may choose to operate at the simplest level where there is a unique number assigned to your website or at the most sophisticated level where you understand the source of the call as well as determine the conversion. Typically, we have observed a 30-50% conversion rate on the phone leads generated by online marketing campaigns.

5. Group Bookings

Group bookings apply only to hotels that promote group business specifically targeted at weddings, meeting planners, etc. We have found that hotels will generate significant amount of group business through online marketing efforts. Most group business leads will either call or fill out an information request (RFP) online. We recommend that all hotels targeting group business should create a form online on their website that visitors can fill out. You can track group business requests by monitoring how many group business requests you get from the website. There are tracking tools that will allow you to determine the total requests received online as well as categorize the leads by weddings, meeting planners, etc. Figure 3 shows a sample website form to be filled out by visitors interested in group business and a sample tracking report for group bookings received through the website.

Figure 3 Group RFP Tracking Tools

6. Tracking Secondary Conversion

Consumers tend to compare hotel rates while searching online. On average, a consumer will search four online websites prior to making a reservation. We have found in our experience that online marketing campaigns will have a secondary impact on the reservations received from other channels such as 3rd party websites – Expedia, Travelocity, etc. This effect is significantly magnified if the hotel does not maintain rate parity or offers better value on other online channels.

One case study for a 4-star independent hotel in Silicon Valley clearly illustrates the impact of online marketing efforts on secondary channels. Even though the website traffic had doubled in the first 3 months of being marketed, the online reservations stayed flat. When looking at other channel reports, the hotel observed that the reservations from a major 3rd party website had increased 1.5X during the same period. When we looked at the rates, we found the rates on the 3rd party channel to be about $20 lower than the rates on their own website. Our hypothesis was that more consumers found the hotel’s website after their marketing efforts began, but actually booked the hotel on the 3rd party website since the rates were lower. The analysis was confirmed after the hotel created rate parity between different channels. There was a drop in the 3rd party channel reservations back to the previous level and the website’s online reservations showed a corresponding increase reflecting the increased online marketing activity and increased visitor traffic to the website.

This is a great example of where the impact was measurable because of rate disconnect between channels. However, it is generally complicated to measure secondary conversions. Our recommendation to hoteliers is to look at online reservations as a whole to measure the overall impact of marketing programs.

Final Insights

In summary, measuring the true return on investment of your online marketing programs can be very complex. The measurement of ROI is complicated because consumers end up using multiple channels to close sales.

Here are the top 10 recommendations for tracking the effectiveness of your marketing campaigns:

Review and monitor all channels – online and offline – for complete tracking, including the hotel website booking engine, phone reservations, group bookings, and secondary conversion on 3rd party channels.

Define what KPIs work for your product/ service while measuring success of your SEM efforts

Great post. In number 4: Phone Tracking, I am not able to see the gifs for the more advanced tools. Can you go more into detail about the advanced tools? 60% of our bookings are over the phone and unless I can track the actual conversions that came from my PPC campaigns, it is hard to justify increasing our PPC budget. Thanks for any help you can provide.